MLB, NBA Divesting Ownership in DFS Operators


Major League Baseball and the National Basketball Association intend on divesting ownership interest in DraftKings and FanDuel, though both will continue to partner with their respective DFS partner in a commercial capacity. The decision comes as MLB and the NBA are actively lobbying for sports betting legislation entitling them to “integrity fees” (a tax on the total wagered on league games), arguing they’ll have an increased role in regulation should SCOTUS strike down PAPSA; a tough sale if also serving as the book, with a stake in winners/losers. Current valuations of the DFS operators (peaked at +/- $1 billion) and exit terms have not been disclosed.

Howie Long-Short: This news becomes the latest indication that DraftKings/FanDuel are shifting business models, pending the legalization of sports betting. MLB lawyer Bryan Seeley recently stated, “we’re not going to be part-owner of a bookmaker”; while DraftKings spokesman James Chisholm was quoted saying DFS companies are “perfectly positioned to succeed (think: 10 million users) in a legal sports betting market.” In February, the company hired a Head of Sportsbook and is reportedly in contacts with “potential casino partners.”

Attitudes towards legalized sports betting have shifted dramatically in this country, over the last 25 years, but the optics of a pro sports league acting as a gaming operator remain poor; so, no surprise seeing the MLB and the NBA disassociate with DraftKings/FanDuel prior to SCOTUS’ decision. Of course, even if the leagues aren’t successful in negotiating an integrity fee, they’ll profit on legalized sports betting through the sale of data rights.

Fan Marino: Did you know that Australians lose more money gambling ($920) annually, than citizens of any other country in the world? That figure is +/-2x more than the average U.S. adult loses per year and +/-50% more than 2nd place, Singapore. Lawmakers point to “pokies” (electronic betting machines) not limited to casinos, as the problem; with over 50% of the losses occurring on the machines. They are onto something. Woolworths Group (OTC: WOLWF, ASX: WOW), a supermarket chain, is the country’s biggest operator of “pokies”; controlling over 12,000 nationwide through a majority stake in Australian Leisure and Hospitality Group.

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